Source: U.S. Department of the Treasury, Issue Brief no. 2, 2007
Treasury today released the second in a series of papers on Social Security. Issue brief No. 2 entitled “Social Security Reform: A Framework for Analysis” discusses a top-down framework for designing and evaluating Social Security reform plans.
Issue Brief No. 1 Social Security Reform: The Nature of the Problem
Source: U.S. Census Bureau, Press release, CB07-141, October 9, 2007
From the press release:
Social Security, Medicare and Medicaid accounted for more than $1 trillion of the $2.3 trillion the federal government spent in 2005, according to the U.S. Census Bureau, which publishes the only consolidated source of data on the geographic distribution of federal expenditures.
The Consolidated Federal Funds Report for Fiscal Year 2005 is a presentation of data on most domestic spending by the federal government for state and county areas of the United States, including the District of Columbia and U.S. outlying areas. The data include expenditures for the Defense Department and the Department of Homeland Security.
The report covers direct payments, grants, procurement awards, and salaries and wages by federal agency and program. The report does not include expenditures for selected intelligence agencies, international payments, foreign aid and interest on the federal debt.
• Direct to Detailed Tables
• Federal Aid to States for Fiscal Year 2005
Source: Angela Harper, Social Security Administration, SSA Publication No. 13-11785, September 2007
Fast Facts & Figures answers the most frequently asked questions about the programs SSA administers. It highlights basic program data for the Social Security (retirement, survivors, and disability) and Supplemental Security Income programs.
• Annual Statistical Supplement, 2007 (forthcoming December 2007)
Source: William A. Galston, Brookings Institution and NYU John Brademas Center, Legislating for the Future Project, September 21, 2007
From the summary:
Within days after the election, President Bush made it clear that he did not intend to play it safe on Social Security reform and other controversial issues. In a post-election press conference, he asserted, “I earned capital in this campaign, political capital, and now I intend to spend it.” He was as good as his word. By mid-January of 2005, the White House had launched a huge initiative, directed by Karl Rove and Ken Mehlman, to mobilize public opinion and build public support for Social Security reform and other key presidential proposals.
The President followed up two weeks later, placing a lengthy discussion of Social Security at the heart of his 2005 State of the Union address. After citing the fiscal and demographic pressures moving the system toward eventual bankruptcy, he listed some basic principles and then reached the nub of the matter: “As we fix Social Security, we also have the responsibility to make the system a better deal for younger workers. And the best way to reach that goal is through voluntary personal retirement accounts.” This approach, the President argued, would offer younger workers a “better deal”: The rate of return would be higher than in the traditional system; the accumulation could be passed on to children and grandchildren; and “best of all, the money in this account is yours, and the government can never take it away.”
By early summer the initiative was on life support, with congressional Democrats uniformly opposed and Republicans in disarray. After Hurricane Katrina inundated what remained of the President’s support, congressional leaders quietly pulled the plug. By October, even the President had to acknowledge that his effort had failed.
Source: U.S. Treasury, September 24, 2007
The Treasury released today the first in a series of issue briefs that will discuss Social Security reform, focusing on the nature of the problem and those aspects of reform that have broad support.
• Paulson Statement on Social Security Reform, September 24, 2007
• Issue Brief No. 1 Social Security Reform: The Nature of the Problem, September 24, 2007
Source: National Partnership for Women and Families
Social Security was established nearly 70 years ago to provide a critical safety net to protect our most vulnerable citizens. Now, citing a fictitious “crisis,” President Bush wants to overhaul Social Security and change the way benefits are calculated and distributed, including having workers invest part of their contributions into private accounts. These proposals will severely undermine the Social Security safety net and disproportionately harm women and minorities. Social Security – the guaranteed foundation for most seniors’ retirement – must be strengthened, not whittled away.
The Social Security reform plan that President Bush is promoting would exacerbate those problems by diverting one-third of a worker’s Social Security contributions to private accounts. The result would be lower guaranteed benefits for ALL future retirees, regardless of whether they open individual private accounts. Lower benefits would cause great harm to women, who are much more likely than men to depend on Social Security’s guaranteed benefits to avoid poverty.
National Partnership for Women and Families: Social Security Page
Source: Laurence J. Kotlikoff, Ben Marx, and Pietro Rizza, National Center for Policy Analysis, NCPA Policy Report No. 301, August 2007
From Policy Digest:
Even the wealthy depend upon Social Security for much of their consumption after they quit working, according to a new report from the National Center for Policy Analysis (NCPA).
• Social Security accounts for virtually all of the discretionary consumption of households with preretirement incomes of less than $50,000 a year or $25,000 for singles.
• Social Security accounts for about one-third of all discretionary consumption for the highest-income households — couples earning $500,000 or singles earning $250,000 prior to retirement.
A primary goal of financial planning is to maintain a consistent standard of living during a person’s lifetime. If Social Security were abolished tomorrow, all retirees would experience an immediate reduction in their consumption. If younger workers were notified in advance, they could adjust their saving and spending habits today to avoid abrupt changes in their standard of living upon retirement. Yet only the highest income workers have the ability to adjust so as to completely smooth their consumption across their lifetime. Because low- and middle-income workers are constrained by current obligations they cannot completely adjust.
Source: American Academy of Actuaries, Issue Brief, June 2007
From the press release:
Gender-related differences in the American work culture have resulted in lower Social Security benefits for women, the American Academy of Actuaries Social Insurance Committee said in a new issue brief, “Women and Social Security.” The actuaries cite differences in wage histories, greater probabilities of outliving a spouse and being single in retirement, and the greater likelihood for women to be temporarily out of the workforce, among the differences that cause their benefits to be smaller even though calculated using gender-neutral rules.
The Academy’s issue brief also determines that women, who on average are more likely to have insufficient income in retirement, are in turn more dependent on Social Security. In fact more than 40 percent of females aged 62 or older rely on Social Security for more than 90 percent of their income, as opposed to 28 percent for males aged 62 or older. Additionally poverty rates for single women aged 65 or older are among the highest of any subgroup in the United States.
Source: Christopher Tamborini, Congressional Research Service, Order Code RL34006, May 17, 2007
Over the past few years, there has been intense debate about Social Security reform in the United States. A number of options, ranging from changing the benefit formula to adding individual accounts, has been discussed. The policy debate takes place against the backdrop of an aging population, rising longevity, and relatively low fertility rates, which pose long-range financial challenges to the Social Security system. According to the 2007 Social Security Trustees Report’s intermediate assumptions, the Social Security trust funds are projected to experience cash-flow deficits in 2017 and to become exhausted in 2041.
As policymakers consider how to address Social Security’s financing challenges, efforts of Social Security reform across the world have gained attention. One of the most oft-cited international cases of reform is Chile. Chile initiated sweeping retirement reforms in 1981 that replaced a state-run, pay-as-you-go defined benefit retirement system with a private, mandatory system of individual retirement accounts where benefits are dependent on the account balance. As a pioneer of individual retirement accounts, Chile has become a case study of pension reform around the world. Although Chile’s experience is not directly comparable to the situation in the United States because of large differences between the countries, knowledge of the case may be useful for American policymakers.